Natural Gas Business in Indonesia

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3Natural Gas Business in Indonesia

Introduction

Gas is an energy future of Indonesia. It is a fact that cannot be denied anymore. Based on existing data, throughout 2010 there were new discoveries of gas reserves are significant enough to achieve 2.09 trillion cubic feet, while the discovery of oil only amounted to 140 million barrels only. On January 1, 2011, proved reserves position and potential of gas in Indonesia reached 153.72 trillion cubic feet of proven and potential reserves and crude oil for 7.41 billion Barrels. (BPMIGAS Bulletin Issue, 2011)

If the reserves are produced with current production levels then the Indonesia's oil reserves will run out for 12 years, while Indonesia's natural gas reserves are still able to survive to meet the needs of up to 46 years. (BPMIGAS Bulletin issue 73: August 2011) Figure below showed Natural Gas Reserve in Indonesia (Eddy Hermantoro, 2010)

Figure 1. Indonesia Gas Reserves
Natural gas is usually found deep below the earth’s surface and is made up of hydrocarbon gas primarily methane (CH4). It is found in oil and gas field and coal mining area (Annual Report PGN, 2010). Natural gas can be used as fuel either fuel for industry, vehicles, housing, power plants and even as raw material for petrochemical products.

Figure 2. Natural Gas Composition
Compared to oil-based fuels and coal, natural gas has several advantages, namely: 1. Environmental Friendly
Natural gas burns more cleanly, releasing fewer (CO2) emissions into the atmosphere. Using natural gas can therefore help to reduce greenhouse gases and global warming
Figure 3. Fossil Fuel Emission
2. Economically efficient energy
Natural gas has excellent economic value. Apart from being an environmentally friendly fuel source, it is cheaper and has greater price stability than oil-based fuels. Comparison of natural gas price and petroleum products can be shown at figure below based on crude oil price of USD 106.72/barrel. (Annual Report PGN, 2010)

Figure 4. Fuel Price Comparison

Indonesian Natural Gas Business in 2001 - 2008
In order to give legal base to the renewal and reconstruction of the agency for upstream oil and gas activity, the government has determined Act No.22/2001 in relation to oil and gas on 23 November 2001 (BPMIGAS Profile Website, 2012) Since Act No.22/2001 on 23 November 2001 concerning oil and gas and Government Regulation No.42/2002 on 16 July 2002 concerning BP MIGAS have been determined, the matter of supervising and establishing Cooperation Contract or Productions Sharing Contract (PSC / KKKS) activity which previously done by PERTAMINA is now done by BPMIGAS. (BPMIGAS Profile Website, 2012) PSC/KKKS is the Business Entity or Permanent Establishment that have right to perform on the Exploration and Exploitation in a Work Area and have a Cooperation Contract with the Agency executive (BPMIGAS). (PERMEN ESDM, 2010). Pertamina, Total E & P, Santos, Petrochina, Conoco Phillips are a few examples KKKS natural gas producer in Indonesia.

Business Entity is a legal entity that runs the type of business permanently, continuously and in accordance with established laws and regulations applicable as well as work and domiciled in the territory of the Republic of Indonesia (Pedoman Tata Kerja BPMIGAS No : 029/PTK/VII/2009) Prior to 2001, PGN was the only natural gas distribution companies in Indonesia. Since Act 22 in 2001 was published, private business entity (Private Natural Gas Distribution Company) can participate in this natural gas distribution business. Direktorat Jendral Migas have a role in determining the permission of KKKS, held a working area tenders, issuing permits of Natural Gas Distribution Company.

Since Act 22 in 2001 was published, private natural gas distribution companies emerging. The company buys and sells natural gas for industrial needs by using pipeline,...
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